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Wednesday, September 20, 2006

Are both the BBC and Jupiter Research daft?

"Only 5% of the music on an iPod will be bought from online music stores."

Really? How surprising! I would have thought everyone would have dumped their large collections of CDs accumulated over many years and immediately bought all their music again via iTunes... or not.

The story reminds me of the recent Guardian piece saying the iPod is on the way out... because less units were sold after Christmas than in the run up to it. Well I never.

iTunes is, without doubt, a huge success. It has sold 1.5 billion tracks and as Jobs pointed out at Showtime, it's now the fifth largest music retailer in the US and rapidly moving towards position #4.

It's also the case that in the UK at least, CD sales are in steady decline while legal downloads are seeing strong growth. I don't know what the situation is in the US.

One thing many people say is that the price of a download is only marginally less than buying the physical CD, and that doesn't seem quite right. But if you think back to the complaints about the high price of CDs a few years ago, you'll recall that the actual cost of producing the CD is a tiny part of the overall price. So in replacing that part of the cost with the cost of running a major website it's not surprising that downloads aren't cheaper.

What you're paying is profit - a small amount for Apple, some 15c a song, and more for the label. Business exists to make profit; c'est la vie.

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